Earnings Call Transcript
Teladoc Health, Inc. (TDOC)
Earnings Call Transcript - TDOC Q3 2022
Operator, Operator
Hello and welcome to the Teladoc Health Third Quarter 2022 Earnings Conference Call. My name is Alex, and I'll be coordinating the call today. I'll hand over to your host, Patrick Feeley, Head of Investor Relations. Patrick, please go ahead.
Patrick Feeley, Head of Investor Relations
Thank you and good afternoon. Today, after the market closed, we issued a press release announcing our third quarter 2022 financial results. This press release and the accompanying slide presentation are available on the Investor Relations section of the teladochealth.com website. On this call to discuss the results are Jason Gorevic, Chief Executive Officer; and Mala Murthy, Chief Financial Officer. During this call, we will also provide our fourth quarter and full year 2022 outlook, and our prepared remarks will be followed by a question-and-answer session. Please note that we'll be discussing certain non-GAAP financial measures that we believe are important in evaluating Teladoc Health's performance. Details on the relationship between these non-GAAP measures to the most comparable GAAP measures and reconciliations thereof can be found in the press release that is posted on our website. Also, please note that certain statements made during this call will be forward-looking statements as defined by the Private Securities Litigation Reform Act of 1995. Such forward-looking statements are subject to risks, uncertainties and other factors that could cause the actual results for Teladoc Health to differ materially from those expressed or implied on this call. For additional information, please refer to our cautionary statement in our press release and our filings with the SEC, all of which are available on our website. I would now like to turn the call over to Jason.
Jason Gorevic, CEO
Thank you, Patrick. Good afternoon and thanks for joining us. After the close today, Teladoc Health reported strong third quarter results driven by solid execution across the business. Revenue grew 17% over the prior year to $611 million, above the midpoint of our guidance range. And adjusted EBITDA of $51 million exceeded the high end of our expectations. While the broader operating environment remains challenging across the economy, during the quarter, we made meaningful progress against our strategy, including four areas I want to briefly highlight: first, driving better outcomes and lower costs for our chronic care populations; second, continued momentum in our Primary360 product with clients and members; third, closing meaningful new deals; and fourth, delivering strong performance at BetterHelp. Starting with chronic care. We're encouraged to see a growing trend of clients looking for partners who can deliver proven cost savings and outcomes. Earlier this month, we held our client advisory panel with leaders from 30 health plans, large employers and health systems in attendance. It was universally clear that value-based care is high on the priority list for these organizations with strong interest in programs that manage chronic conditions and drive engagement with populations via virtual primary care relationships. Value-based arrangements are becoming even more important in the current macroeconomic environment. And as I look at the chronic care pipeline, we're seeing a notable increase in deals with such features. We view this trend as very favorable for us since our proven outcomes present a tremendous value proposition for our clients, and we're well positioned in the market to capitalize on that dynamic. An example of our ability to drive outcomes and savings is evidenced by the results of one of our recent pilots. In early 2021, we launched a chronic care shared savings pilot with fully insured members at a large Blue Cross Blue Shield plan. Our team recently concluded a study with this partner's actuarial team, who determined that we have exceeded our medical cost savings target by 60%. Not only do we drive better outcomes for our members and drive more savings for our client, but we were able to realize a small shared savings bonus. We believe the outcome of this pilot and others like it validate our ability to move further toward value-based contracting over time. Ultimately, we believe the ability to leverage broad integrated virtual and digital care models to drive measurable savings uniquely positions us to capitalize on market demand for these arrangements. Turning to Primary360. At the start of the year, we told you we would provide additional insight later in the year. And so today, we'll provide you with a first look at some of the encouraging results we've seen thus far. Primary360 members are reporting high satisfaction with NPS scores currently in the 70s, a strong vote of confidence. Members who have engaged with Primary360 this year are connecting with care teams at a rate greater than once every three months, a result of the significant value we are delivering. We're also finding that members with chronic conditions are significantly more likely to engage with Primary360. This year, we're seeing those members as four times as likely to meet with their Primary360 care team. Meanwhile, one in every three of our Primary360 members is using two or more of our services, demonstrating Primary360's role not just as virtual primary care, but also as a front door to multi-specialty care. So while we're at the beginning stages of bringing integrated virtual primary care to the market, the strong member and client response to the service gives us a lot of confidence in the long-term opportunity. As I turn to commercial momentum, we've discussed throughout the first half of the year, our pipeline has developed more slowly than we expected coming into the year. Year-to-date bookings, which represents the estimated incremental annual revenue contribution from deals signed during the year, is roughly equivalent to the same period in the prior year. We are, however, encouraged by a number of new significant deals that we expect to contribute to our growth for the next few years. First, you may have seen HCSC's press release last month announcing our partnership to make Primary360 along with our general medical, mental health and nutrition services available to self-insured employer groups. This follows on the heels of our agreement last year to bring our full suite of chronic care products to HCSC employer clients. The launch of this partnership is validation of our integrated whole-person care strategy and another example of our ability to land and expand across products. That deal represents just one example of the momentum we're seeing with large health plans looking to partner with us to offer our products and services to their employer clients. In addition to Primary360, we're also seeing this momentum in chronic care with multiple large health plans looking to partner. We expect these agreements will contribute to our pipeline over a multiyear period. Finally, while we typically close many new employer deals in any given quarter, I wanted to highlight one in particular as I think it underscores the value proposition of our broad integrated service offering. We're replacing three different competitors all at once across chronic care, telemedicine and our myStrength mental health solutions at one of the largest providers of care to correctional facilities and other government-run institutions. We believe the market is shifting away from disparate point solutions and toward integrated offerings, a trend that we believe strongly favors Teladoc Health. Turning to BetterHelp. The team continued to drive impressive top line growth, particularly in this time of increased macroeconomic uncertainty while addressing the tremendous unmet need for global medical services. While the yield on advertising spend remains below where we expected it to be at the beginning of the year, we've seen it stabilize as anticipated. BetterHelp remains on track to deliver strong revenue and margin contribution. We expect to continue building upon BetterHelp's significant leadership position in the direct-to-consumer mental health market while driving both growth and margin. With that, I'll turn the call over to Mala for a review of the third quarter and our forward guidance.
Mala Murthy, CFO
Thank you, Jason, and good afternoon, everyone. During the third quarter, total revenue increased 17% year-over-year to $611 million. The biggest driver of that growth was BetterHelp, our direct-to-consumer mental health brand, which grew over 35% as compared to the prior year's quarter or approximately 7% sequentially over the second quarter and in line with our expectations. We continue to expect the typical seasonal slowdown in advertising spending during the holiday season in the direct-to-consumer market, and therefore, expect to see material acceleration in consolidated adjusted EBITDA margin in the fourth quarter. Turning to chronic care. The total number of our members enrolled in one or more of our chronic care program was 791,000 at the end of the third quarter, an increase of 66,000 or 9% over the prior year's quarter and a sequential decline of 7,000 enrollees as compared to the second quarter. The decline in enrollment was driven by the loss of one government sector client, which due to changes in leadership, has chosen to cease offering primary care management programs to its populations. If not for the loss of this client, chronic care member enrollment would have increased by 15,000 lives over the second quarter. I would also add that while the client's decision resulted in a higher-than-expected attrition rate in the third quarter, even including this loss, our full year member churn is still trending in line to slightly better than the past two years, a testament to our efforts to drive better member engagement. We ended the quarter with total U.S. paid membership of 57.8 million members, an increase of 1.2 million members over the second quarter, driven by a combination of new virtual care client onboardings and population expansions within existing clients. Individuals with visit fee only access was 24.3 million at the end of the third quarter. Average U.S. revenue per member per month was $2.61 in the third quarter, up 9% from $2.40 in the prior year's quarter. As compared to the second quarter, PMPM growth was driven by growth in BetterHelp revenue, although largely offset by membership mix as we added 1.2 million net new telemedicine members in the quarter. Adjusted EBITDA was $51.2 million in the third quarter compared to $67.4 million in the prior year's quarter and above the high end of our guidance range. The third quarter adjusted EBITDA outperformance relative to our expectations was driven primarily by stronger cost control as we look to drive efficiency. Both technology and development expense and gross margin contributed to the upside. Net loss per share in the third quarter was $0.45 compared to a net loss per share of $0.53 in the third quarter of 2021. Net loss per share includes stock-based compensation expense of $0.34 per share, amortization of acquired intangibles of $0.30 per share, and $0.02 per share of lease abandonment costs associated with office space rationalization. During the third quarter, we generated free cash flow of $20 million and ended the quarter with $900 million in cash and short-term investments on the balance sheet. Now turning to forward guidance. Last quarter, we noted that full year results were likely to be near the low end of our prior guidance range. Our updated guidance today is consistent with that expectation. For the full year 2022, we expect revenue to be in the range of $2.395 billion to $2.41 billion. We expect adjusted EBITDA for the full year to be in the range of $240 million to $250 million. We expect total U.S. paid membership of 57 million to 58 million members, an increase of 1.5 million members over our prior guidance. We expect total visits for the year to be between 18.4 million and 18.6 million visits, representing growth of 19% to 21% over the prior year. For the fourth quarter of 2022, we expect revenue of $625 million to $640 million, representing growth of 13% to 15% year-over-year. We expect fourth quarter adjusted EBITDA to be in the range of $88 million to $98 million. Total fourth quarter visits are expected to be between 4.7 million and 4.9 million visits.
Jason Gorevic, CEO
With that, I will turn the call back to Mala for closing remarks. Thanks, Mala. This week, we are pleased to welcome Laizer Kornwasser to the team as our new President of Enterprise Growth and Global Markets. Some of you may know Laizer from his role as Chief Operating Officer of CareCentrix, where he was responsible for driving operational excellence and business strategy, growing EBITDA through product and client diversification and leading the integration of the company's diabetes franchise to build a new suite of services. At Teladoc Health, Laizer will help optimize company performance across all client channels and product lines to further unlock the revenue and profit growth potential of our whole-person care strategy. I look forward to working closely with him and know he will make an immediate impact on our commitment to empowering all people everywhere to live their healthiest lives. With that, we'll open the call for questions.
Operator, Operator
Our first question for today comes from Lisa Gill of JPMorgan.
Lisa Gill, Analyst
Jason, it's the third quarter, so you know I'm going to ask about the selling season. You talked a little bit about signing some incremental deals. You talked about where the pipeline is. But can you give us an idea of how to think about how the selling season is going to play into 2023? And as we think about some of the newer deals, are any of them with some of the new payment models you talked about? And are there anything from an implementation cost perspective or anything else to think about as we think about headwinds and tailwinds going into '23.
Jason Gorevic, CEO
Thank you, Lisa, for the question. I appreciate it. I'll provide an overview of our revenue outlook moving forward and then dive into bookings and our pipeline. While we won't give specific guidance until February, I want to highlight some factors influencing our outlook. First, regarding BetterHelp, we expect its performance to be linked to the financial health of consumers, making it sensitive to the macroeconomic environment. We've seen some growth impact from this dynamic this year, as mentioned in the July call. However, if the economy improves next year with lower inflation and greater consumer confidence, this could benefit us. Conversely, if inflation remains high and pressures consumers, it could affect BetterHelp since it is one of the pricier online purchases that isn't a physical product. We plan to maintain a balanced focus on growth and margin in BetterHelp, which has grown swiftly to a $1 billion run rate. We're targeting both growth and efficiency, and you can already see some benefits, particularly in gross margin improvement, coming from BetterHelp in the latter half of this year. Regarding pipeline development, I view the third quarter as a catch-up period for bookings. Earlier this year, we noted that pipeline development was slower than anticipated. However, the third quarter proved to be our largest booking quarter, showing significant growth compared to last year's third quarter. Year-to-date, our gross bookings are nearly on par with last year’s total. For our B2B segment, revenue next year will be determined by this year’s baseline revenue plus bookings minus churn. Our churn remains stable and slightly improved compared to the last few years. We still have two months left in the selling season, and the fourth quarter is crucial for us. Currently, our pipeline resembles last year’s, but the deals we've closed are notably larger. Our average deal size in the third quarter was double that of the first two quarters and 50% larger than the same period last year. We continue to see successful cross-sells, with over three-quarters of our deals being multiproduct sales. With regard to value-based deals, we have signed several this year that allow us to benefit from shared savings. I'm pleased with the pilot results we've discussed regarding a large Blue plan, and I believe this sets a positive tone for pursuing more value-based arrangements.
Operator, Operator
Our next question comes from Richard Close of Canaccord.
Richard Close, Analyst
I had two, if I could flip those in. But Jason, you talked a little bit about balancing the growth in margins on BetterHelp. Just curious if you could go in maybe a little bit more detail on that. And then can you talk about market share? Obviously, with the tough economy, I suspect some of your competitors and the noise you talked about earlier in the year maybe have pulled back some. So just talk about the competitive environment in that as well.
Jason Gorevic, CEO
Yes. Richard, there's not much more to add regarding BetterHelp's focus on balancing growth and margin. We continually aim to optimize that business. For instance, we've made some improvements to the gross margin by increasing our digital interactions with consumers and offering virtual group therapy sessions, which provide a more efficient way to connect with clients, enhancing our gross margins. Interestingly, this has also led to a reduction in visit volume. Fewer visits in the BetterHelp business is beneficial as it boosts our gross margin and allows us to serve a larger number of people with fewer professional resources. This strategy positively impacts the lifetime value of a consumer, improves member retention, and is advantageous for our margins. Regarding margin or market share, I've engaged with several clients, including some of our largest ones and fellow CEOs in the healthcare sector. We're observing effects from an increasingly tight economic environment and elevated capital costs, which are particularly challenging for smaller companies. Yesterday, I spoke with a significant client who expressed concerns over whether some smaller enterprises can survive. While I wouldn't say we've witnessed a significant shakeout yet, there are many conversations happening among clients and other healthcare companies that reflect this reality.
Operator, Operator
Our next question comes from Jailendra Singh from Truist Securities.
Jailendra Singh, Analyst
Jason, I was wondering if you could spend a little bit more time on the BCBS pilot program you called out just in general. Trying to understand the role Teladoc is expected to play in the shift to value-based care. Clearly, the outcomes are pretty encouraging, but I'd like to understand if Teladoc's role is going to evolve in the shift. Should we think about the company more as a value-based care enabler? Or should we think about them as a company taking more risk at some point in the future? And if you can quantify how much of the benefit in the quarter from these shared savings.
Jason Gorevic, CEO
Yes. So Jailendra, welcome back. It's nice to hear from you. I'll discuss the specific shared savings pilot and the downstream impacts we're observing. Regarding the shared savings bonus, it's small and not material to the quarter, so I won't quantify it. However, we did participate in a program focused on chronic conditions, specifically diabetes management. We had a base PMPM and the chance to share in the savings we generated. We greatly exceeded the expected savings, beating the target by 60%. The structure of that deal included a risk corridor where we shared savings with the health plan, and it worked out very well for us. An important downstream impact, which might not be immediately apparent, is that as a result of our success, the client has expedited the expansion of both the population we serve and the range of products and services offered to them. We benefitted from a small economic boost due to the shared savings bonus, but the more significant impact is the acceleration of our product offerings and the population we serve within that client. This also provides us with valuable insights as we pursue more value-based arrangements. We're eager to align our fees with guaranteed clinical and economic outcomes, which we can achieve thanks to our strong data science capabilities and proven track record in making a difference.
Mala Murthy, CFO
And I would add that it sort of generates the return on the investments that we have been saying we are making in all of our data infrastructure over the past 18 months to 2 years. So this is an example of the return on investments such as that.
Operator, Operator
Our next question comes from Ryan Daniels of William Blair.
Ryan Daniels, Analyst
Jason, I wanted to go back to Primary360. It's interesting that you're seeing higher utilization, high NPS. So I'm curious if there's an opportunity to move into value-based contracting with that as well so that you might be able to garner shared savings as the better utilization with your clinicians drives better outcomes over time.
Jason Gorevic, CEO
Yes. Ryan, I appreciate that. I'll go through just a couple of other stats that I didn't include in my prepared remarks. We're very, very pleased with the progress in Primary360. As I sat down with some of our largest employer clients, some of the things that they were most moved by were not just the things that I talked about, the data points that I talked about relative to treating members with chronic illnesses, but especially the fact that what we're seeing is 60% of our Primary360 members who engage with a virtual primary care relationship haven't seen a physician in at least two years. And almost 30% of them say that they wouldn't have seen a provider if they didn't have access to Primary360. And so those are some of the things that when I talk to the largest employers who are interested in the long-term health of their employees, are really focused on. Because we know if we can't engage consumers and their distant franchise from the healthcare system, they're never going to do early identification of chronic conditions or take the necessary steps relative to appropriate screenings. When we talk to large health plans, they're very focused, as you might imagine right now, on Star Ratings and closing HEDIS measures and closing gaps in care. And because of all those reasons, Ryan, you're exactly right, we are starting to lean into value-based arrangements with some of our health plan partners, and to a lesser degree, with our employer partners for Primary360. And I think you'll see that continue to evolve over time.
Operator, Operator
Our next question comes from Sean Dodge of RBC.
Sean Dodge, Analyst
Looking at the gross margins for a moment, we have seen a notable increase on a consolidated basis over the past couple of quarters. Jason, you referenced the BetterHelp example. Can you provide any additional insights into the drivers behind this? Are there any one-time items included? Given that you are approaching a gross margin of 70%, with 69.6% adjusted for last quarter, how sustainable should we expect this to be moving forward?
Mala Murthy, CFO
Yes. Sean, regarding our gross margin performance, we have indeed observed an increase as we progressed through the year. The most significant rise is attributed to improved efficiencies in BetterHelp, as mentioned earlier. Specifically, the key factor enhancing our gross margin is related to the engagement levels of our membership base. We have noticed that members are engaging more through digital platforms and utilizing services like group therapy, which contribute to greater efficiency and subsequently improve our gross margin over the year. Additionally, we are evolving our provider model from what was once solely a 1099 model to a more hybrid approach, and this transition is yielding positive results in terms of both productivity and efficiency. We are quite satisfied with the productivity metrics from our full-time employee providers. We will continue to monitor and optimize these factors, as they play a crucial role in the sustained improvement of our gross margins.
Operator, Operator
Our next question comes from Jessica Tassan from Piper Sandler.
Jessica Tassan, Analyst
Congrats on a good quarter. We were hoping you could maybe give us some color just on how pricing within chronic care is trending, especially as you continue to see multi-solution kind of adoption and bookings? And then just how should we think about the growth rate of the chronic care business exiting '22 and into 2023?
Jason Gorevic, CEO
Yes. Jess, I'll address the pricing question while Mala can discuss growth rates. We are seeing pricing remain stable in the chronic care management market for a couple of reasons. First, most of our sales are now multiproduct sales. There aren't many competitors that can match even a portion of our full portfolio, let alone the entire suite. This situation allows us to clearly define our pricing instead of reacting to competitive single-solution bids. The second reason is our willingness to take on risks related to clinical outcomes. This approach reduces the perceived risk for clients purchasing our services. By putting our fees at risk for clinical measures and, in some cases, for guaranteed returns on investment, we can maintain robust pricing and even explore opportunities for shared savings, like we've seen with the pilot involving the Blue Cross Blue Shield plan. Lastly, our strong track record and stability work in our favor, especially as buyers are concerned about the sustainability of smaller players in a challenging capital environment. Overall, we are observing stable pricing.
Mala Murthy, CFO
And then, Jess, in terms of your question around chronic care growth revenue growth, we expect high single-digit chronic care revenue growth this year. And that's what I would expect us to have exiting through the end of this year into next year.
Operator, Operator
Our next question comes from Stephanie Davis of SVB Securities.
Stephanie Davis, Analyst
Congrats on a solid quarter. Could you walk us through some of the granularity on the EBITDA beat and the upside surprises, such as greater scale efficiency or any benefit from the Blue Cross Blue Shield savings relationship? And given that upside, are you still considering a similar magnitude of DTC ad cuts to fuel the 4Q ramp? Or could you moderate this a bit more to focus on growth, especially when we think about January and February, its impact on that?
Mala Murthy, CFO
Thank you, Stephanie. Regarding the factors contributing to our positive results, most of the increase came from cost management. Given this year's revenue performance and the broader economic situation, we are placing a stronger focus on efficiency, similar to many other companies. These efforts led to improved margins this quarter. The primary reason for our margin improvement was attributed to technology and development costs, while the second factor was the gross margin performance, particularly in BetterHelp, where we are observing better utilization trends. In response to your question about the full-year adjusted EBITDA and the Q4 outlook, I see it this way: when we discussed our full-year adjusted EBITDA expectations last quarter, we anticipated it would be close to the lower end of our previous guidance. Our updated forecast indicates we can achieve an adjusted EBITDA within the $240 million to $250 million range. Looking ahead to Q4's adjusted EBITDA, we expect a sequential increase primarily due to reduced advertising expenses typical for this season. I want to emphasize that this is not a new development; prior to COVID, we consistently reduced ad spending in Q4 for BetterHelp to optimize for pricing and returns. As advertising costs typically rise during the holiday season, we strategically manage our ad expenditures. Throughout COVID, these dynamics shifted, but we are now returning to our pre-COVID practices. Additionally, BetterHelp is more established now, so these changes are more pronounced. Also, for Q4 adjusted EBITDA, we expect to see an increase in technology and development spending as we continue to invest in the business, which is included in our Q4 adjusted EBITDA guidance.
Operator, Operator
Our next question comes from Charles Rhyee of Cowen.
Charles Rhyee, Analyst
Jason, you gave us some metrics around Primary360, and I think you characterized it as for members who have engaged with it. Can you give us a sense for those members who it's available for, what the actual uptake has been in terms of members selecting a virtual primary care team? And then secondly, what are your expectations then as we think about for HCSC next year? If it's available to their self-insured clients, is the selling efforts really driven by you? Or is that something that's driven by HCSC in terms of pushing the product?
Jason Gorevic, CEO
Yes. It's always a team approach. We work with our partners to engage their self-insured clients. Their self-insured clients have to make the decision that they want to go with Primary360 or any of our chronic care management programs. And so that's a team sell. Our team is deeply engaged with theirs. And as we've said, that's a multiyear approach. So we expect to see the benefit of that over the course of multiple years as we penetrate that book of business and the other health plan partners that we work with. With respect to the overall population, we now have several hundred thousand members who are eligible for Primary360 through their insurance coverage. We have tens of thousands of members who have enrolled in plans that have Primary360 as an integral part of them. We've done thousands of primary care visits this year, and it's growing rapidly. So remember, this is really the first year that we are in the market with that product. And we saw a significant step-up in volume in the third quarter versus the first half of the year. But we haven't quantified it at this point. We haven't given a direct number on either the penetration of the population that's eligible or the total number. I think you'll see us continue to expand the clarity on that as we get through the end of this year and into next year, and quite frankly, through this open enrollment season.
Operator, Operator
Our next question comes from Daniel Grosslight of Citi.
Daniel Grosslight, Analyst
I just want to clarify quickly before I ask my actual question. Did you mention that the Blue Cross Blue Shield bonus had an impact on this quarter? Can you provide a specific amount for that? Now, onto my question about 2023 revenue. Sorry, please continue.
Mala Murthy, CFO
So Daniel, it was immaterial to this quarter.
Daniel Grosslight, Analyst
Okay. Is it going to hit next quarter? Or it's immaterial to your revenue guidance?
Mala Murthy, CFO
It's immaterial. It's immaterial.
Daniel Grosslight, Analyst
Okay. Got it. Okay. And then as I think about revenue growth for 2023, Jason, you mentioned your pipeline is similar to where you were last year. Attrition is a bit better. If you're likely to see a step-down in BetterHelp growth next year, assuming a softening economy, should we think about growth rates for 2023 at slightly below where you are based on your '22 guidance, which is around 18% year-over-year?
Jason Gorevic, CEO
So we're not going to give guidance today. We'll do that in February. What we tried to do is give you sort of the components of how to think about that and how to start modeling that. And so I'm going to stop short of going further than that. I think I've given quite a bit relative to the bookings thus far, the pipeline thus far, and how we're thinking about BetterHelp. And obviously, at $1 billion, that's a big business, and it takes a lot to continue to drive those very impressive growth rates.
Operator, Operator
Our next question comes from Elizabeth Anderson from Evercore.
Sameer Patel, Analyst
This is Sameer Patel speaking on behalf of Elizabeth Anderson. I was just wondering, what are you guys seeing in the market in terms of the pricing on Virtual First plans? Is it coming up cheaper or not so much? Any light would be great.
Jason Gorevic, CEO
I assume you are referring to the pricing and premiums for the end consumer or buyer. Based on what we observed last year, I don't think everything is fully established in the market regarding the exchanges. What I can share is that the Virtual First exchange products we participated in this year were not the lowest priced on the exchange, which I view as a positive sign. It reflects the value that consumers are recognizing in these Virtual First plan designs. While the premium might be slightly higher, the benefits are more substantial due to reduced cost sharing, making it a plan that aligns with consumers' needs. Overall, we are very satisfied with the pricing outcomes for 2022 plans. We will see how things unfold for 2023, but so far, the experience has been quite favorable.
Operator, Operator
Our next question comes from Steve Valiquette from Barclays.
Unidentified Analyst, Analyst
This is Tiffany on for Steve. I think you talked about the macro impact on the DTC side. I was wondering if you could give a bit more color on maybe what you're seeing on the B2B side in terms of macro environment and employer sentiment.
Jason Gorevic, CEO
Yes. We're noticing that HR executives are somewhat distracted as they manage employee benefits and health, especially in this challenging inflationary environment that requires different workforce management strategies. Additionally, many employees are now working remotely rather than in physical office spaces, contributing to this distraction. However, we haven't observed a significant change in employer purchasing patterns. Initially, I thought there was a slowdown in decision-making among benefits leaders during the first two quarters. But in the third quarter, we saw a recovery in bookings, indicating that employers were more focused and this helped us move past some of the earlier issues.
Mala Murthy, CFO
It is challenging to determine the impact of a potential recession on our business, particularly because virtual care was not prevalent during the last recession. Therefore, we lack historical data to reference.
Operator, Operator
Our next question comes from George Hill of Deutsche Bank.
George Hill, Analyst
I guess I've got one for Jason and one for Mala. Jason, you talked a lot about the margin opportunity and looking into '23 focused on cost opportunities as opposed to kind of outsized revenue growth. I guess my big-picture question would be is, do you feel like the company is rightsized from a cost perspective? And kind of how aggressive do you feel like you could be there to attack costs? And then, Mala, just kind of a housekeeping question on gross margins. You talked about the gross margin expansion being attributed to the growth in BetterHelp. If we see some of that consumer weakness that a lot of people are talking about for '23, would we expect to see gross margins revert a little bit?
Mala Murthy, CFO
Yes. I will address both questions, George. Regarding cost control, we are always mindful of managing our expenses, which is not a new approach for us. Given the current macroeconomic situation, all companies must focus more on cost management, and we are certainly included in that. We have increased our efforts to control expenditures, as mentioned in our adjusted EBITDA results for the quarter, and we are pleased to see the outcomes of these efforts. We are intentionally implementing multiple initiatives aimed at reducing costs. For example, we have been working on a project for several months to improve the efficiency and streamlining of several financial systems. Additionally, we are consolidating our real estate footprint as many of our colleagues work remotely, which has led us to assess and begin reducing our office space needs. These are just two examples of many initiatives in progress. To clarify, we haven’t provided any specific insights into the revenue growth rate for 2023. As always, we will share more detailed guidance during our Q4 call in February. We are continually looking for ways to optimize our cost structure and will closely examine this as we approach 2023. In conclusion, we will be thoughtful in balancing efficiency with the necessary investments to support our revenue growth. There is still a significant opportunity for revenue growth in this space, and it would be unwise not to make the right investments to capture that potential. Based on what we've discussed during this call, we are well-positioned to pursue this goal. We will continue to optimize our cost structure while also making the necessary investments for long-term revenue growth.
Operator, Operator
Our next question comes from Cindy Motz of Goldman Sachs.
Cindy Motz, Analyst
I just wanted to go back to chronic care a little bit. So in the quarter, you lost a client and you're down a little bit. But judging by the enthusiasm and the bookings, it feels like that we can assume maybe that's going to go up next quarter with the guidance. And then with PMPM as well, you said it's sort of stable. So I would think the overall PMPM, we could assume that is going to rise. Is that correct?
Jason Gorevic, CEO
We're not providing a specific outlook on chronic care management revenue or membership for Q4. However, we are optimistic about the overall CCM product portfolio and its reception in the market. Mala mentioned the growth we would have achieved without the loss of one client, which would have resulted in an addition of 16,000 members in enrollment and 26,000 in total program enrollment. We are pleased with this, especially in the third quarter of the year. We expect to maintain this positive outlook as we assess our bookings for the year and look ahead to next year. Mala also provided a general outlook for CCM growth moving forward.
Operator, Operator
That was the final question for today. So that concludes today's conference call. Thank you for joining. You may now disconnect.